There is no Middle Class Tax Cut on the Table

Erik29 November 2012

There is no middle class tax cut. That’s right, the “tax cuts for 98% of Americans” the Democrats keep shouting about don’t exist. Instead, there are currently only three proposals on the table. The first of these is the Republican plan which has already been passed in the House of Representatives. This plan would maintain the Bush tax rates for all Americans.

The second plan is the Democrats’ plan. This plan would reinstate the Clinton tax hikes for anyone making more than $250,000 in earned income. Cynically, this plan wouldn’t actually impact billionaires like Warren Buffet as their wealth comes from investment income, not “earned income.” It would, however, limit the ability of middle class to save, invest, and move up the ladder themselves.

The third plan is the do-nothing plan. Under this plan, all of the Clinton tax hikes are reinstated, and taxes will go up for everyone. Further, this plan would invoke sequestration, and result in automatic cuts to both defense and entitlements.

The Democrats are wholly unwilling to compromise. They refuse to offer any cuts in spending despite four years of record-setting deficits. As such, the best option for the Republicans is the third option. If the Democrats refuse to come to the negotiating table, they will finally get the tax increases they’ve been begging for. The “Bush Tax Cuts” they’ve maligned for a decade will expire.

When the dust finally settles and the media finishes blaming Republicans, perhaps the clean slate coupled with the goodies they lost by failing to act will bring the Democrats to the table in good faith for an actual negotiation.

$250,000 is a single point of income data. “Middle Class” is a distinction based on wealth which—although impacted by income—is not directly linked to income. This will be the subject of a future post.